$GLD calls spike 4-fold in days

It took less than a week for bullish option traders to run up exponential gains in the SPDR Gold Trust.

On May 28, Investitute’s tracking systems detected the purchase of 10,100 August $127 calls in one print for $0.53 above open interest of 758 contracts with shares at $120.81. Investitute co-founder Jon Najarian cited the unusual activity at that time in choosing GLD as his final trade on CNBC’s “Halftime Report.”

Those calls traded for as much as $2.37 today, about 4.5 times their purchase price. The stock rose 4.54% in the same time frame, showing how quickly options can far outperform their underlying shares.

Long calls lock in the price where investors can buy a stock, letting them position for a rally at limited cost with the potential for significant leverage. They carry less risk than owning shares because the most that can be lost is the price of the options no matter how far the stock might fall.

GLD was up 0.26% to $125.47 today. The exchange-traded fund has rallied as the dollar has weakened and nervous investors have returned to gold as a safe haven.